Disabled Borrowers Get $5.8B in Student Loan Relief

More than 323,000 borrowers will learn of their debt discharges next month

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The Education Department will forgive $5.8 billion in student debt owed by borrowers with permanent disabilities and will streamline the process for future discharges.

More than 323,000 borrowers will be notified next month that their debt is being wiped out, and the discharges are expected to be complete by year-end, the department announced Thursday.

Key Takeaways

  • More than 323,000 borrowers with significant disabilities will have $5.8 billion in student debt forgiven, the Education Department announced Thursday.
  • The department also intends to stop requiring people to submit income verification paperwork for three years after their debt is discharged. 

These borrowers already were eligible to have their loans forgiven under existing rules that apply to people who have disabilities that prevent them from working. The changes announced Thursday make the process automatic for many and will eliminate a requirement that borrowers submit income verification paperwork for three years after the discharge—or be put back in hock.

“Today’s step is another indication that the department is listening to the voices of student loan borrowers,” said Dan Zibel, vice president of the National Student Legal Defense Network, in a statement.

Paperwork Problems

In the past, borrowers had to file a series of applications as well as provide proof of so-called “total and permanent disability” from a doctor, the Department of Veterans Affairs, or the Social Security Administration. If accepted, they had to submit regular paperwork over a three-year period proving that they did not make more money than allowed under the rules. 

A 2016 government study found that 98% of debt reinstatements happened because the borrowers failed to submit paperwork, not because their income was too high.

Under the new system, the department will use Social Security Administration data to identify  student borrowers with total and permanent disabilities. The administration of President Donald Trump paved the way for this in 2019 by allowing the Education Department to use Department of Veteran Affairs data to identify disabled veterans eligible for similar loan discharges. 

The department said it will attempt to eliminate the income verification requirement by October. In the meantime, it will indefinitely continue a pandemic-era suspension of income verification.

"Today's action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law," said Education Secretary Miguel Cardona.

A group of 18 organizations—including National Consumer Law Center and National Student Legal Defense Network—requested in June the department make similar rule changes, and advocates praised the department’s decision as “life altering” for people with disabilities.

Have a question, comment, or story to share? You can reach Rob at ranthes@thebalance.com.

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